Should I pay myself a salary or dividends from my limited company?

Most limited company directors take a small salary — usually set at the level that uses your personal allowance and National Insurance thresholds efficiently without triggering employer's National Insurance unnecessarily — and draw the rest of what they need as dividends from post-tax company profit, since dividends are taxed at lower rates than salary and don't attract National Insurance at all.

The right split depends on your specific profit level, other income, and the current dividend allowance and tax bands, which change most tax years, so a split that worked well last year isn't automatically still optimal this year. Dividends can only be paid out of retained, post-Corporation-Tax profit — paying dividends you haven't actually earned is treated by HMRC as an unlawful distribution and can create a real problem, not just a technical one. If you're taking money out of your company without having worked out the salary/dividend split properly for this tax year specifically, it's worth checking you're not either overpaying tax or creating a compliance issue.